Consider the Edgeworth box below, which represents the amount of tea and crumpets available to Eliza and Henry. Eliza and Henry are initially at point A.
Consider the Edgeworth box below, which represents the amount of tea and crumpets available to Eliza and Henry. Eliza and Henry are initially at point A. Suppose that while Eliza is using the powder room, Henry takes four cups of tea from Eliza. Feeling guilty, he leaves two of his crumpets on her nightstand before hastily making his exit. Which of the following statements is true?
Solution
This increases Henry\'s utility without affecting Eliza\'s utility; it is a Pareto improvement.
.
Consider the Edgeworth box below- which represents the amount of tea a.docx
1. Consider the Edgeworth box below, which represents the amount of tea and crumpets available
to Eliza and Henry. Eliza and Henry are initially at point A.
This increases Henry's utility and Eliza's
utility; it is a Pareto improvement.
This increases Henry's utility without affecting
Eliza's utility; it is a Pareto improvement.
This does not affect either person's utility.
This increases Henry's utility but decreases Eliza's
utility.
Consider the Edgeworth box below, which represents the amount of tea and crumpets available
to Eliza and Henry. Eliza and Henry are initially at point A. Suppose that while Eliza is using the
powder room, Henry takes four cups of tea from Eliza. Feeling guilty, he leaves two of his
crumpets on her nightstand before hastily making his exit. Which of the following statements is
true?
Solution
This increases Henry's utility without affecting Eliza's utility; it is a Pareto improvement.
